With Game #6 of the 2011 World Series (Texas Rangers v St. Louis Cardinals) scheduled to play tonight after a rain-delay day, baseball is on my mind.
As we’ve seen in Games 1-5, baseball is a game of –
- inches: as in Cruz catching a Pujols fly ball with his back to the outfield fence for an out (Game #2)
- poor telephone conversations: as in not once but TWICE when the Cardinals’ bullpen doesn’t understand LaRussa’s telephone instructions on "who" to warm up (Game #5)
- quick, judgment calls: as in the umpire’s "missed" call at first base in Game #4, which opened the door for the first of one big inning after another by the Cardinals
In a sense, baseball does reflect the life of a special asset manager.
I’ve worked distressed loans that were played like a baseball game –
- inches away from a settlement . . . when it blew up
- telephone conversations that were . . . interesting
- parties made quick, judgment calls
However, there are aspects of dealing with distressed commercial assets that follow a different set of rules from those used when working on performing investments. As different as a baseball World Series game is different from a game in the regular season.
Here are a few general statements for you consider, and discuss with your lawyer, as you deal with distressed commercial real estate loans:
- You’re the Umpire: in many states, once a commercial mortgage loan is in default, implied covenants of good faith and fair dealing no longer apply. But don’t lose track of this next statement . . .
- But Be the Good Umpire: even absent a covenant of good faith and fair dealing, don’t forget the possibility that the asset could slide into a court case, where your behavior or statements might be twisted or turned by an attorney for uses entirely contrary to your original intent. So, make the call but make it in a defensible manner (and call your lawyer before you do so)
- Be Thick Skinned: don’t take it personally. People will be people and it could be rough and tumble game. Don’t take it personally.
- The Fair Comes In October: as I told the kids when they were young (and often repeat this to myself) – "The [State] Fair comes in October." In other words, life is not fair and resolution of the defaulted loan can differ wildly from your expectations.
- The Ump Doesn’t Say Much: remember, the umpire doesn’t say much when the player launches a rant – use these tips
If you have helpful baseball analogies, please post them below.